PRE-QUALIFYING FOR A LOAN

In order to purchase a home, you have to get a loan. In order to get a loan, you have to qualify. And in order to qualify, you must be approved. Sounds simple. It’s not. For a lot of people, getting a loan from a lender (bank, mortgage company, credit union, private investor, etc.) is much harder than finding the home. You are, after all, borrowing a lot of money, and the lender wants to be assured that you are able to repay him by determining if you are “qualified”, or have the financial wherewithal and credit history, to make an effort to make the mortgage payments. The lender is not the only one that is concerned about your “qualifications”, though. The seller and the REALTOR(S) also want to make sure you are not wasting there time – the seller doesn’t want to take his house off the market for 30-45 days and lose another potential sale if you cannot get the loan, and the real estate agents don’t want to waste their time for the same reason.

Most agents require at least a “pre-approval letter” from the lender to get started, with a “pre-qualifying letter” to follow within a certain number of days thereafter (personally, I don’t think a “pre-approval letter” is worth the paper it’s written on, as it does not legally obligate the lender to make the loan, but it’s a starting point). Most sellers require at least the “pre-qualifying letter” before considering an offer, as this means the lender has reviewed most aspects of your finances/credit history, and barring any unforeseen circumstances, will issue a loan for the property.

So the first thing to do before seriously looking for a new home is see if you can qualify for a loan, and based on the lenders criteria, the maximum amount of loan (or home) you qualify for, and obtain the pre-approval letter. This can generally be done before you leave the lender’s office. With my client’s approval, I generally try to attend that initial meeting (especially for first time homebuyers). During that initial visit you will fill out a loan application and supply the lender with a number of documents, and after extensive review, a qualifying letter can be obtained.

Documents the lender will need you to supply include:

Copy of the contract
W-2 forms and Federal tax returns for the last two years
Current income and employment history for the last two years
Outstanding loans, including other real estate, student loans, credit cards, etc., and loan amounts of each
Bank statements for all accounts – checking and savings
Other sources of income and/or investments such as stocks or bonds
Divorce decree (if applicable) and income/outgo of monies re: such
Check for credit report (and sometimes the appraisal is pre-paid)
For VA loans – DD214 forms and Certificate of Eligibility

Only after an underwriter reviews your credit history, verifies you have enough liquid assets to make the required down payment, calculates monthly costs for housing, and determines you meet all the necessary guidelines based on the information received, will you be pre-approved for the loan and a qualifying letter be issued.

There are several types of loan programs that can help you qualify for a home loan - contact me for a list of approved lenders or for suggestions.

Pre-Qualify for Your Mortgage

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